Analyst & Investor Day Presentation October 31, 2014 - Crc.com

107 Pages·2014·11.26 MB·English

Analyst & Investor Day Presentation
October 31, 2014
0
Forward-Looking / Cautionary Statements
This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this presentation that address activities,
events or developments that California Resources Corporation (the “Company” or “CRC”) assumes, plans, expects, believes or anticipates will or
may occur in the future are forward-looking statements. The words “believe,” “expect,” “may,” “estimate,” “will,” “anticipate,” “plan,” “intend,”
““ffoorreesseeee,”” ““sshhooulldd,”” ““wooulldd,”” ““ccooulldd,”” oorr ootthheerr ssiimmiillaarr eexpprreessssiioonnss aarree iinntteennddeedd ttoo iiddeennttiiffy ffoorrwaarrdd-llooookkiinngg ssttaatteemmeennttss, whhiicchh aarree ggeenneerraalllly nnoott
historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. Without limiting the
generality of the foregoing, forward-looking statements contained in this presentation specifically include the expectations of plans, strategies,
objectives and anticipated financial and operating results of the Company, including as to the Company’s drilling program, production, hedging
activities, capital expenditure levels and other guidance included in this presentation. These statements are based on certain assumptions made
byytheComppanyybasedonmanaggement’sexppectationsandppercepptionofhistoricaltrends,currentconditions,anticippatedfuture developpmentsand
other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are
beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking
statements. These include, but are not limited to, compliance with regulations or changes in regulations and the ability to obtain government
permits and approvals; commodity pricing; risks of drilling; regulatory initiatives relating to hydraulic fracturing and other well stimulation
techniques; tax law changes; competition for and costs of oilfield equipment, services, qualified personnel and acquisitions; risks related to our
aaccqquuiissiittiioonn aaccttiivviittiieess;; tthhee ssuubbjjeeccttiivvee nnaattuurree ooff eessttiimmaatteess ooff pprroovveedd rreesseerrvveess aanndd rreellaatteedd ffuuttuurree nneett ccaasshh fflloowwss;; vvuullnneerraabbiilliittyy ttoo eeccoonnoommiicc ddoowwnnttuurrnnss
and adverse developments in our business due to our debt; insufficiency of our operating cash flow to fund planned capital expenditures; inability
to implement our capital investment program profitably or at all; concentration of operations in a single geographic area; any need to impair the
value of our oil and natural gas properties; compliance with laws and regulations, including those pertaining to land use and environmental
protection; restrictions on our ability to obtain, use, manage or dispose of water; inability to operate outside of California; inability to drill identified
locations when planned or at all; concerns about climate change and air quality issues; catastrophic events for which we may be uninsured or
underinsured; cyber attacks; operational issues that restrict production or market access; and uncertainties relatedto the spin-off, the agreements
relatedtheretoandtheanticipatedeffectsofrestructuringorreorganizingourbusiness.
Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct
orupdateanyforward-lookingstatement,whetherasaresultofnewinformation,futureeventsorotherwise,exceptasrequiredbyapplicablelaw.
TThhiiss pprreesseennttaattiioonn iinncclluuddeess ffiinnaanncciiaall mmeeaassuurreess tthhaatt aarree nnoott iinn aaccccoorrddaannccee wwiitthh ggeenneerraallllyy aacccceepptteedd aaccccoouunnttiinngg pprriinncciipplleess ((““GGAAAAPP””)), iinncclluuddiinngg
EBITDAX. While management believes that such measures are useful for investors, they should not be used as a replacement for financial
measures that are in accordance with GAAP. For a reconciliation of EBITDAX to the nearest comparable measure in accordance with GAAP, please
seetheAppendix.
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Cautionary Statements Regarding Hydrocarbon
Quantities
CRC has provided internally generated estimates for proved reserves and aggregated proved, probable and possible reserves (“3PReserves”) as of
December31,2013inthispresentation,with each categoryof reservesestimatedinaccordance withSECguidelinesand definitions,though ithas
notreportedallsuch estimatestotheSEC. Asusedinthispresentation:
• PPrroobbaabbllee rreesseerrvveess.. WWee uussee ddeetteerrmmiinniissttiicc mmeetthhooddss ttoo eessttiimmaattee pprroobbaabbllee rreesseerrvvee qquuaannttiittiieess,, aanndd wwhheenn ddeetteerrmmiinniissttiicc mmeetthhooddss aarree uusseedd,, iitt
isaslikelyasnotthatactualremainingquantitiesrecoveredwillexceedthesumofestimatedprovedplusprobablereserves.
• Possible reserves. We use deterministic methods to estimate possible reserve quantities, and when deterministic methods are used to
estimate possible reserve quantities, the total quantities ultimately recovered from a project have a low probability of exceeding proved
plusprobablepluspossiblereserves.
The SEC prohibits companies from aggregating proved, probable and possible reserves estimated using deterministic estimation methods in filings
withtheSECduetothedifferentlevelsofcertaintyassociated witheachreservecategory.
Actual quantities that may be ultimately recovered from CRC’s interests may differ substantially from the estimates in this presentation. Factors
affecting ultimate recovery include the scope of CRC’s ongoing drilling program, which will be directly affected by commodity prices, the availability
of capital, regulatory approvals, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations,
transportation constraints and other factors; actual drilling results, including geological and mechanical factors affecting recovery rates; and
budgetsbaseduponourfutureevaluationofrisk,returnsandtheavailabilityofcapital.
Inthispresentation,theCompanymayusetheterms“oil-in-place”ordescriptionsofresourcepotentialwhichtheSECguidelinesrestrictfrombeing
includedinfilingswiththeSEC. ThesehavebeenestimatedinternallybytheCompanywithoutreviewbyindependentengineersandincludeshales
which are not considered in most older, publicly available estimates. The Company uses the term “oil-in-place” in this presentation to describe
estimates of potentially recoverable hydrocarbons remaining in the applicable reservoir. Actual recovery of these resource potential volumes is
inherently more speculative than recovery of estimated reserves and any such recovery will be dependent upon future design and implementation
of a successful development plan. Management’s estimate of original hydrocarbons in place includes historical production plus estimates of
proved, probable and possible reserves and a gross resource estimate that has not been reduced by appropriate factors for potential recovery and
as a result differs significantly from estimates of hydrocarbons that can potentially be recovered. Ultimate recoveries will be dependent upon
nnuummeerroouussffaaccttoorrssiinncclluuddiinnggtthhoosseennootteeddaabboovvee.
Inaddition,theCompany’sproductionforecastsandexpectationsforfutureperiodsaredependentuponmanyassumptions,includingestimatesof
production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected by significant
commoditypricedeclinesordrillingcostincreases.
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Presenters
Bill Albrecht
• Executive Chairman
Todd Stevens
• President and Chief Executive Officer
Shawn Kerns
• EVP - Corporate Development
Robert Barnes
• EVP - Northern Operations
Frank Komin
• EVP - Southern Operations
Darren Williams
• EVP - Exploration
Charlie Weiss
•• EEVVPP -- PPuubblliicc AAffffaaiirrss
Mark Smith
• Senior EVP and Chief Financial Officer
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Agenda
PAGE
Executive Summary and Transaction Overview 5
Strategy and Investment Highlights 11
California Growth Potential 29
Northern Operations 45
Southern Operations 57
Exploration Overview 68
Regulatory and Community Involvement 80
FFiinnaanncciiaall OOvveerrvviieeww 8866
Appendix 95
Management Biographies 101
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Separation Overview
• Creates industry leading California-focused E&P
• Allows CRC to reinvest substantially all cash flow after debt service to grow its business
• Enables CRC’s management team to focus on and accelerate the development and execution of its business in
RRaattiioonnaallee iittss ccoorree aarreeaass ooff ooppeerraattiioonn
• Enables application of its technical expertise in specific, under-exploited and under-invested reservoirs and
fields
• Enhances CRC’s market recognition with investors because of its status as an industry leader in California
• CRC will own and operate the California business as an independent publicly-traded company with the requisite
technical expertise
• OXY stockholders will receive at least 80.1% of CRC shares and keep their shares in OXY
SStructure
• OXY will retain approximately 19.9% of CRC common stock
> Retained shares to be disposed of or distributed within 18 months
• CRC ticker to trade on NYSE
Bond financing Regular Way
closed 10/1 Trading 12/1
Process AUG SEP OCT NOV DEC
Credit Agreement When Issued Record Date
signed 9/24 Trading 11/13 11/17
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Operating Independently
• Occidental systems and processes have been cloned to provide the basis for independent operations
Ready for > Avoids business interruption introduced by changing systems
Independence
• TThhee CCRRCC oorrggaanniizzaattiioonnaall ssttrruuccttuurree iiss ddeessiiggnneedd aanndd ssuubbssttaannttiiaallllyy ssttaaffffeedd
• Competitive benefits, base salary and bonus, supplemented with substantial equity compensation
• Ready for stand-alone operations, Transition Services Agreement provides access to advisory services, if needed
• TTrraannssiittiioonn sseerrvviicceess mmaayy iinncclluuddee::
> Administrative, payroll, human resources, data processing, environmental, health and safety, financial audit
support, financial transaction support, marketing support and other support services, information
Transition Services technology systems and various other corporate services
AAggrreeeemmeenntt
•• CCRRCC eexxppeeccttss tthhee aaggrreeeemmeenntt wwiillll pprroovviiddee ffoorr tthhee pprroovviissiioonn ooff ssppeecciiffiieedd ttrraannssiittiioonn sseerrvviicceess, iiff nneeeeddeedd, ggeenneerraallllyy ffoorr
a period of up to 12 months, with a possible extension of 6 months (an aggregate of 18 months), on a cost or a
cost-plus basis
• CRC has longstanding relationships with well-established service providers
> Broad range of services and products such as cementing and drill-bits supplied by major OFS companies
SServiice PProviidders > Drill rigs and workover rigs sourced from specialized suppliers
> Additional ancillary services and products such as pumps provided by smaller contractors
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CRC’s Board of Directors (12/1/14)
Name Position Experience
Former PresidentOXY O&G Americas; President OXY Oil and Gas USA; VP
Bill Albrecht Executive Chairman
California Operations OXY
DDiirreeccttoorr, PPrreessiiddeenntt aanndd CChhiieeff EExxeeccuuttiivvee
Todd Stevens Former VP Corporate Development OXY; VP California Operations OXY
Officer
IndependentConsultant, private investor and former Managing Partner
JustinGannon Director
with Grant Thornton and audit partner with Arthur Andersen
RonHavner Director Current Chairman, Presidentand CEO of Public Storage
HaroldKorell Director FormerChairmanand CEO of Southwestern Energy Co.
Foundingprincipal and current President and Chairman of MoncriefOil
RichardMoncrief Director
International
CurrentExecutive Vice President of Lowe Enterprises, Inc. and Director of
AvedickPoladian Director
Occidental Petroleum
Current President, CEO and Chief Investment Officer of Kayne Anderson
RobertSinnott Director
Capital Advisors, L.P.
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Corporate Governance
• 88 mmeemmbbeerrss;; 66 tthhaatt qquuaalliiffyy aass iinnddeeppeennddeenntt
Board of
• Highly experienced executives and oil and gas professionals
Directors
• Classified board until annual meeting in 2018
• Nominating and Governance
Key • Audit
Committees
• Compensation
• Health, Safety and Environment
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Transaction Timeline
October 2014 November 2014 December 2014
S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 1 1 2 3 4 5 6
5 6 7 8 9 10 11 2 3 4 5 6 7 8 7 8 9 10 11 12 13
12 13 14 15 16 17 18 9 10 11 12 13 14 15 14 15 16 17 18 19 20
19 20 21 22 23 24 25 16 17 18 19 20 21 22 21 22 23 24 25 26 27
26 27 28 29 30 31 23 24 25 26 27 28 29 28 29 30 31
30
Key event Market holiday
KKeeyy eevveennttss
Date Event
October 31st Analyst Day
November 13th When Issued Trading
November 17th Ex-Distribution Date
November 30th Distribution Date
December 1st First Day Regular Way Trading
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